RI still committed to trade deal: FM

Lilian Budianto , The Jakarta Post , Jakarta | Sat, 01/09/2010 11:15 AM | Headlines

Indonesia remains fully committed to its free trade agreement with China under ASEAN but will also seek ways to address the domestic industry's fears voiced that their business will be hurt by the inflow of Chinese products, says the foreign minister.

The government submitted a proposal to delay tariff reduction on 228 items under the free trade agreement between the Southeast Asia regional grouping and China last week to the ASEAN Economic Community Council.

The AC-FTA, effective early this year, applied zero tariffs on 6,682 tariff lines in 17 sectors, including 12 in manufacturing, and five in agriculture, mining and maritime sectors.

"We will respect the international commitment we have reached with any country. Every agreement has its own executing mechanism and we will see how to address the concern of each member," Foreign Minister Marty Natalegawa said Friday after delivering the annual foreign policy statement.

"I am not saying for certain that it will mean a renegotiation but we will make sure that we communicate our concerns with our partners."

Edi Yusuf, the Foreign Ministry's director of ASEAN economic cooperation affairs, said the proposal Jakarta submitted had yet to impact on the effective free trade agreement and there was still no definite date for ASEAN to convene to follow up the proposal.

"It could be addressed at a senior economic official meeting or a ministerial level meeting."

He said Indonesia was the only country among other six ASEAN members that sought a delay in the FTA with China after they agreed to fully implement it by 2010.

Cambodia, Vietnam, Myanmar and Laos will join in the ASEAN China FTA by 2015.

Indonesia and China trade volume reached US$26.88 billion in 2008 in favor of China.

Among ASEAN countries, only Malaysia, the Philippines and Thailand have trade surplus with China.

Any delay on the free trade agreement would affect other ASEAN members.

Chinese Ambassador to Indonesia Zhang Qiyue said renegotiation was unlikely because the tariff reduction arrangement has proceeded step by step, from as early as 2005, with full implementation of zero tariff commencing Jan. 1.

Business associations blame Indonesia's lack of readiness to face the ASEAN-China free trade agreement (FTA) on poor infrastructure.

The chairman of the Indonesian Motorcycle Industry Association (AISI), Gunadi Sindhuwinata, said Friday that infrastructure across the country had not improved although the FTA had been discussed for 10 years.

"Good infrastructure is the key to cut unnecessary costs so that we can provide competitive prices against China's cheap products," Gunadi told The Jakarta Post.

The government's proposal to suspend the FTA might be useless, he said.

"It's already too late. The quality of our infrastructure is far behind China's."

Poppy Dharsono, the chairwoman of the Indonesian Garment and Textile Producers Association (APGI), said China's excellent infrastructure had successfully trimmed its textile products' prices by up to 56 percent.

"That was in the past, before the FTA cut the import tax tariffs.

"Can you imagine how cheap China's products will be due to the FTA?" (bbs)